AS-13

Ch: 11
Accounting for Investments

Definition of Investments
Investments are assets held by an enterprise for earning income by way of dividends, interest and
rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-
trade (inventory) are not ‘investments’.

Shares, debentures and other securities held as stock-in-trade (i.e., for sale in the ordinary course of
business) are not ‘investments’ as defined in this Standard. However, the manner in which they are
accounted for and disclosed in the financial statements is quite similar to that applicable in respect of
current investments. Accordingly, the provisions of this Standard, to the extent that they relate to
current investments, are also applicable to shares, debentures and other securities held as stock-in-trade,
with suitable modifications as specified in this Standard.

Classification of Investments

Classification of Investments

Current Investments Long Term Investments

A current investment is an investment that is by its nature readily realisable and is intended to be held
for not more than 1 year from the date on which such investment is made. The intention to hold for
not more than 1 year is to be judged at the time of purchase of investment.

A long term investment is an investment other than a current investment.

Initial Recognition
All investments are initially recognised at Cost.

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AS 13: Accounting for Investments

Cost of Investment

Investment Acquired

By Payment in Cash By issue of Shares or other By Exchange of another asset

Securities

Purchase Price Fair Value of Asset given

+Acquisition charges Fair Value of Securities up (First Preference)
such as Brokerage Fees Issued OR
and Duties, etc. Fair Value of Investment
acquired
Whichever is more Clearly
Evident
Cost of Investment should be reduced by –
(i) Interest received for pre-acquisition period.
(ii) Dividend received for pre-acquisition period only if they clearly represent recovery of cost.

Note:
Interest, Dividend and Rentals earned and accrued for the post-acquisition period are generally
regarded as income and must be transferred to P&L A/c.

Bonus Shares
Bonus Shares are issued to the existing shareholders at free of cost. So, the cost of acquisition of bonus
shares shall be NIL.

Right Shares

Right shares are Right shares are not

subscribed subscribed

Amount paid towards Right is sold in the

the purchase of right market
shares shall be its cost

Income from sale of

To be added to the right is to be credited
carrying amount of to P&L A/c
original holding

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 AS 13: Accounting for Investments

However, where investments are acquired on cum-right basis and the market value of investments
after their becoming ex-right is lower than the cost for which they were acquired, it may be
appropriate to apply the sale proceeds of rights to reduce the carrying amount of such investment to
the market value. Excess income from sale of rights, if any, shall be credited to P&L A/c.

Example 1:
Mr. X acquires 200 shares of a company on cum-right basis for ` 70,000. He subsequently receives an offer
of right to acquire fresh shares in the company in the proportion of 1:1 at ` 107 each. He does not subscribe
but sells all the rights for ` 12,000. The market value of the shares after their becoming ex-rights has also
gone down to ` 60,000. What should be the accounting treatment in this case?
Solution: As per AS 13, where the investments are acquired on cum-right basis and the market value of
investments immediately after their becoming ex-right is lower than the cost for which they were acquired,
it may be appropriate to apply the sale proceeds of rights to reduce the carrying amount of such
investments to the market value. In this case, the amount of the ex-right market value of 200 shares
bought by X immediately after the declaration of rights falls to ` 60,000. In this case, out of sale proceeds
of ` 12,000, ` 10,000 may be applied to reduce the carrying amount to bring it to the market value and
` 2,000 would be credited to the profit and loss account.

Carrying Amount of Investments

Carrying Amount of Investment

Current Investment Long-term Investment

Carrying amount of each current It is usually carried at cost

investment is Cost and Fair Value,
whichever is less If there is a decline in value of investment and,
if such decline is not temporary i.e. permanent
Any reduction in realisable value decline, then carrying amount of investment is
is debited to P&L A/c. reduced by the amount of such decline.

However if realisable value of The resultant reduction in carrying amount is

investment is increased charged to P&L A/c. This reduction amount is
subsequently, the increase in value reversed when there is a rise in the value of
of current investment to the level investment but such rise in value should not be
of the cost is credited to P&L A/c. temporary.

Note: Valuation of current as well as long-term investment should be done on individual basis and not
an overall (or global) basis.

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AS 13: Accounting for Investments

Example 2:
An unquoted long term investment is carried in the books at a cost of ` 2 lakh. The published accounts of
the unlisted company received in May, 2025 showed that the company was incurring cash losses with
declining market share and the long term investment may not fetch more than ` 20,000. How will you deal
with this in preparing the financial statements of R Ltd. for the year ended 31st March, 2025?
Solution:
As stated in the question that financial statements for the year ended 31st March, 2025 are still under
preparation – The answer has been given on the assumption that the financial statements are yet to be
completed and approved by the Board of Directors.
Also, the fall in value of investments has been considered on account of conditions existing on the balance
sheet date.
Investments classified as long term investments should be carried in the financial statements at cost.
However, provision for diminution should be made to recognize a decline, other than temporary, in the
value of the investments, such reduction being determined and made for each investment individually. AS 13
‘Accounting for Investments’ states that indicators of the value of an investment are obtained by reference to
its market value, the investee's assets and results and the expected cash flows from the investment. On the
above basis, the facts of the given case clearly suggest that the provision for diminution should be made to
reduce the carrying amount of long term investment to ` 20,000 in the financial statements for the year
ended 31st March, 2025.

Example 3:
X Ltd. on 1-1-2025 had made an investment of ` 600 lakh in the equity shares of Y Ltd. of which 50% is
made in the long term category and the rest as temporary investment. The realisable value of all such
investment on 31-3-2025 became ` 200 lakh as Y Ltd. lost a case of copyright. From the given market
conditions, it is apparent that the reduction in the value is not temporary in nature. How will you recognize
the reduction in financial statements for the year ended on 31-3-2025?
Solution:
X Ltd. invested ` 600 lakh in the equity shares of Y Ltd. Out of the same, the company intends to hold 50%
shares for long term period i.e. ` 300 lakh and remaining as temporary (current) investment i.e. ` 300 lakh.
Irrespective of the fact that investment has been held by X Ltd. only for 3 months (from 1.1.2025 to
31.3.2025), AS 13 lays emphasis on intention of the investor to classify the investment as current or long
term even though the long term investment may be readily marketable.
In the given situation, the realisable value of all such investments on 31.3.2025 became ` 200 lakh i.e. ` 100
lakh in respect of current investment and ` 100 lakh in respect of long term investment.
As per AS 13, ‘Accounting for Investment’, the carrying amount for current investments is the lower of cost
and fair value. In respect of current investments for which an active market exists, market value generally
provides the best evidence of fair value.
Accordingly, the carrying value of investment held as temporary investment should be shown at realisable
value i.e. at ` 100 lakh. The reduction of ` 200 lakh in the carrying value of current investment will be
charged to the profit and loss account.
The Standard further states that long-term investments are usually carried at cost. However, when there is a
decline, other than temporary, in the value of long term investment, the carrying amount is reduced to
recognize the decline.

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 AS 13: Accounting for Investments

Here, Y Ltd. lost a case of copyright which drastically reduced the realisable value of its shares to one third
which is quiet a substantial figure. Losing the case of copyright may affect the business and the performance
of the company in the long run. Accordingly, it will be appropriate to reduce the carrying amount of long
term investment by ` 200 lakh and show the investments at ` 100 lakh, since the downfall in the value of
shares is other than temporary. The reduction of ` 200 lakh in the carrying value of long term investment
will also be charged to the Statement of profit and loss.

Investment Properties
An investment property is an investment in land or buildings that are not intended to be occupied
substantially for use by, or in the operations of, the investing enterprise.
An investment property is accounted for in accordance with cost model as prescribed in AS-10,
‘Property, Plant and Equipment’. The cost of any shares in a co-operative society or a company, the
holding of which is directly related to the right to hold the investment property, is added to the carrying
amount of the investment property.

Disposal of Investments
Gain/Loss to be recognised in P&L A/c = Sale Proceeds (net of expenses) – Carrying amount
When disposing of a part of the holding of an individual investment, the carrying amount shall the
average cost.
In respect of shares, debentures and other securities held as stock-in-trade, the cost of stock disposed of
is determined by applying an appropriate cost formula (e.g. FIFO, Average cost, etc.) as per AS 2.

Reclassification of Investments

Reclassification of Investment

Long term to Current Current to Long term

Lower of Cost and Carrying

Lower of Cost and Fair Value at
Amount at the date of
the date of reclassification.
reclassification.

Example 4: ABC Ltd. wants to re-classify its investments in accordance with AS 13. Decide and state on the
amount of transfer, based on the following information:
(i) A portion of current investments purchased for ` 20 lakh, to be reclassified as LT investment, as the
company has decided to retain them. The market value as on the date of Balance Sheet was ` 25 lakh.
(ii) Another portion of current investments purchased for ` 15 lakh, to be reclassified as long term
investments. The market value of these investments as on the date of balance sheet was ` 6.5 lakh.
(iii) Certain LT investments no longer considered for holding purposes, to be reclassified as current
investments. The original cost of these was ` 18 lakh but had been written down to ` 12 lakh to
recognize other than temporary decline as per AS 13. (Ans: (i) ` 20 lakh, (ii) ` 6.5 lakh, (iii) ` 12 lakh)

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AS 13: Accounting for Investments

PRACTICAL QUESTIONS

Q.1 On 1st January 2025, Singh had 20,000 equity shares in X Ltd. Nominal value of the shares was ` 10
each but their book value was ` 16 per share. On 1st June 2025, Singh purchased 5,000 more equity
shares in the company at a premium of ` 4 per share.
On 30th June, 2025, the directors of X Ltd. announced a bonus and rights issue. Bonus was declared at
the rate of 1 equity share for every 5 shares held and these shares were received on 2nd August, 2025.
The terms of the rights issue were:
(a) Rights shares to be issued to the existing holders on 10th August, 2025.
(b) Rights issue would entitle the holders to subscribe to additional equity shares in the Company at
the rate of one share per every three held at ` 15 per share-the whole sum being payable by 30th
September, 2025.
(c) Existing shareholders were entitled to transfer their rights to outsiders, either wholly or in part.
(d) Singh exercised his option under the issue for 50% of his entitlements and the balance of rights he
sold to Ananth for a consideration of ` 1.50 per share.
(e) Dividends for the year ended 31st March, 2025, at the rate of 15% were declared by the Company
and received by Singh on 20th October, 2025.
(f) On 1st November, 2025, Singh sold 20,000 equity shares at a premium of ` 3 per share.
The market price of share on 31-12-2025 was ` 14. Show the Investment Account as it would appear
in Singh’s books on 31-12-2025 and the value of shares held on that date.
(Ans: Carrying Amount as on 31-12-2025 - ` 1,96,071)

Q.2 On 1.4.2024, Sundar had 25,000 equity shares of ‘X’ Ltd. at a book value of ` 15 per share (Nominal
value ` 10). On 20.6.2024, he purchased another 5,000 shares of the company at ` 16 per share. The
directors of ‘X’ Ltd. announced a bonus and rights issue.
No dividend was payable on these issues.
The terms of the issue are as follows:
 Bonus basis 1:6 (Date 16.8.2024)
 Rights basis 3:7 (Date 31.8.2024) Price ` 15 per share
 Due date for payment 30.9.2024.
 Shareholders were entitled to transfer their rights in full or in part. Accordingly, Sundar sold
33.33% of his entitlement to Sekhar for a consideration of ` 2 per share.
 Dividends: Dividends for the year ended 31.3.2024 at the rate of 20% were declared by X Ltd.
and received by Sundar on 31.10.2024. Dividends for shares acquired by him on 20.6.2024 are
to be adjusted against the cost of purchase.
 On 15.11.2024, Sundar sold 25,000 equity shares at a premium of ` 5 per share.
You are required to prepare in the books of Sundar.
(1) Investment Account
(2) Profit & Loss Account
For your exercise, assume that the books are closed on 31.12.2024 and shares are valued at average
cost.

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 AS 13: Accounting for Investments

Solution:
Books of Sundar
Investment Account (Scrip: Equity Shares in X Ltd.)
Date Particulars No. of Dividend ` Date Particulars No. of Dividend `
Shares (`) Shares (`)
1.4.2024 To Bal b/d 25,000 3,75,000 31.10.2024 By Bank
20.6.2024 To Bank 15.11.2024 A/c
A/c 5,000 80,000 (dividend
16.8.2024 To Bonus 31.12.2024 on shares
(W.N.1) 5,000 — acquired
30.9.2024 To Bank on
(Rights 20/6/2024)
Shares) (W.N.4) — 50,000 10,000
(W.N.3) 10,000 1,50,000
15.11.2024 To Profit By Bank
(on sale of (Sale of
shares) 44,444 shares) 25,000 3,75,000
31.12.2024 To P&L By Bal. c/d
A/c 50,00055 (W.N.6) 20,000 2,64,444

45,000 50,000 6,49,444 45,000 50,000 6,49,444

Profit and Loss Account (An extract)

Particulars Amt (`) Particulars Amt (`)
To Balance c/d 1,04,444 By Profit transferred 44,444
By Sale of rights (W.N.3) 10,000
By Dividend (W.N.4) 50,000
1,04,444 1,04,444

Working Notes:
( , , )
(1) Bonus Shares = = 5,000 shares
( , , , )
(2) Right Shares = × 3 = 15,000 shares

(3) Right shares renounced = 15,000 ×1/3 = 5,000 shares

Sale of right shares = 5,000 × 2 = ` 10,000
Right shares subscribed = 15,000 – 5,000 = 10,000 shares
Amount paid for subscription of right shares = 10,000 × 15 = ` 1,50,000

(4) Dividend received = 25,000 (shares as on 1st April 2024) × 10 × 20% = ` 50,000
Dividend on shares purchased on 20.6.2024 = 5,000 × 10 × 20% = ` 10,000 is adjusted to Investment
A/c
(5) Profit on sale of 25,000 shares
= Sales proceeds – Average cost

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AS 13: Accounting for Investments

( , , , , , , )
= ` 3,75,000 – [ ,
× 25,000]
= ` 3,75,000 – ` 3,30,556
= ` 44,444
(6) Cost of shares on 31.12.2024
( , , , , , , )
,
× 20,000 = ` 2,64,444

Q.3 On 1st April, 2024, Rajat has 50,000 equity shares of P Ltd. at a book value of ` 15 per share
(nominal value ` 10 each). He provides you the further information:
(1) On 20th June, 2024 he purchased another 10,000 shares of P Ltd. at ` 16 per share.
(2) On 1st August, 2024, P Ltd. issued one equity bonus share for every six shares held by the
shareholders.
(3) On 31st October, 2024, the directors of P Ltd. announced a right issue which entitles the holders
to subscribe three shares for every seven shares at ` 15 per share. Shareholders can transfer their
rights in full or in part.
Rajat sold 1/3rd of entitlement to Umang for a consideration of ` 2 per share and subscribed the rest
on 5th November, 2024.
You are required to prepare Investment A/c in the books of Rajat for the year ending 31st March,
2025. (Ans: Carrying Amount as on 31.03.2025 – ` 12,10,000)

Q.4 On 1st April, 2024 Ms. Jayshree has 5,000 equity shares of Rama Limited (a listed company) of face
value of ` 10 each. Ms. Jayshree has purchased the above shares at ` 15 per share and paid a
brokerage of 2% and stamp duty of 1%.
On 15th May, 2024 Ms. Jayshree purchased another 5,000 shares of Rama Limited at ` 18 including
brokerage and stamp duty.
On 26th August, 2024 Rama Limited issued one bonus equity share for every 1 equity share held by
the shareholders.
On 23rd October, 2024 Rama Limited announced a Right Issue which entitles the holders to subscribe
1 equity share for every 2 equity shares held at ` 20 per share. Shareholders can exercise their rights in
full or in part. Ms. Jayshree sold 1/4th of entitlement to Mr. Mike for a consideration of ` 10 per share
and subscribed the rest on 1st November 2024.
Ms. Jayshree also sold 10,000 shares at ` 25 per share on 1st November, 2024.
The shares of Rama Limited were quoted at ` 11 per share on 31st March, 2025.
You are required to prepare Investment account for Ms. Jayshree for the year ended on 31st March
2025. [May 2022]
Solution:
In the Books of Ms. Jayshree
Investment Account (Equity Shares of Rama Ltd.)
Date Particulars No. of Amt (`) Date Particulars No. of Amt (`)
Shares Shares
1.4.2024 To Balance B/d 5,000 77,250 1.11.2024 By Bank A/c 10,000 2,50,000
15.5.2024 To Bank A/c 5,000 90,000
26.8.2024 To Bonus Issue 10,000 - 31.3.2025 By P&L A/c

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 AS 13: Accounting for Investments

(Loss on 9,386
Valuation)
1.11.2024 To Bank A/c
(Right Issue) 7,500 1,50,000
1.11.2024 To P&L A/c 31.3.2025 By Bal. c/d. 17,500 1,92,500
(Profit on Sale) 1,34,636
27,500 4,51,886 27,500 4,51,886

Working Notes:
1. Right Issue
Ms. Jayshree is entitled to 10,000 right shares. Out of that, 1/4th i.e. 2,500 rights have been sold @
` 10 per share.
Income from sale of rights = 2,500 × ` 10 = ` 25,000.
This income from sale of rights shall be transferred directly to profit and loss account.
2. Sale of 10,000 shares on 1.11.2024
Average Cost of 10,000 shares sold = [(77,250 + 90,000 + 1,50,000) / 27,500] x 10,000 = ` 1,15,364
Profit on sale = (10,000 x ` 25) – ` 1,15,364 = ` 1,34,636
3. Carrying Amount as on 31.3.2025
Carrying amount of investments shall be lower of cost or fair value.
Cost of 17,500 shares = [(77,250 + 90,000 + 1,50,000) / 27,500] × 17,500 = ` 2,01,886
Fair Value = 17,500 × ` 11 = ` 1,92,500
Thus, the carrying amount shall be ` 1,92,500 being lower of cost and fair value. Since, fair value is
less than the cost, the difference ` 9,386 (i.e. ` 2,01,886 – ` 1,92,500) shall be debited to P&L A/c.

Q.5 On 1.4.2024, Mr. Krishna Murty purchased 1,000 equity shares of ` 100 each in TELCO Ltd. @ ` 120
each from a Broker, who charged 2% brokerage. He incurred 50 paise per ` 100 as cost of shares
transfer stamps. On 31.1.2025, Bonus was declared in the ratio of 1:2. Before and after the record date
of bonus shares, the shares were quoted at ` 175 per share and ` 90 per share respectively. On
31.3.2025, Mr. Krishna Murty sold bonus shares to a Broker, who charged 2% brokerage.
Show the Investment Account in the books of Mr. Krishna Murty, who held the shares as Current
assets and closing value of investments shall be made at Cost or Market value whichever is lower.
Solution:
In the books of Mr. Krishna Murty
Investment Account for the year ended 31st March, 2025
(Scrip: Equity Shares of TELCO Ltd.)
Date Particulars No. of Cost (`) Date Particulars No. of Cost (`)
Shares Shares
1.4.2024 To Bank A/c 1,000 1,23,000 31.3.2025 By Bank A/c 500 44,100
(W.N.1) (W.N.2)
31.1.2025 To Bonus shares 31.3.2025 By Balance c/d
(W.N.5) 500 − (W.N.4) 1,000 82,000
31.3.2025 To Profit & loss
A/c (W.N.3) − 3,100
1,500 1,50,000 1,26,100 1,500 1,26,100

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AS 13: Accounting for Investments

Working Notes:
1. Cost of equity shares purchased on 1.4.2024
= (1,000 × ` 120) + (2% of ` 1,20,000) + (½% of ` 1,20,000) = ` 1,23,000
2. Sale proceeds of equity shares (bonus) sold on 31st March, 2025 = (500 × ` 90) – (2% of ` 45,000) =
` 44,100
3. Profit on sale of bonus shares on 31st March, 2025
= Sale proceeds – Average cost
= ` 44,100 – (` 1,23,000 /1,500) x 500 = ` 41,000
= ` 3,100
4. Valuation of equity shares on 31st March, 2025
Cost = (` 1,23,000/1,500) x 1,000 = ` 82,000
Market Value = 1,000 shares × ` 90 = ` 90,000
Closing balance has been valued at ` 82,000 being lower than the market value.
5. Bonus shares do not have any cost.

Q.6 Mr. X purchased 500 equity shares of ` 100 each in Omega Co. Ltd. for ` 62,500 inclusive of
brokerage and stamp duty. Some years later the company resolved to capitalise its profits and to issue
to the holders of equity shares, one equity bonus share for every share held by them. Prior to
capitalisation, the shares of Omega Co. Ltd. were quoted at ` 175 per share. After the capitalisation,
the shares were quoted at ` 92.50 per share. Mr. X. sold the bonus shares and received at ` 90 per
share.
Prepare the Investment Account in X’s books on average cost basis.
(Ans: Profit on Sale – ` 13,750 and Carrying Amount – ` 31,250)

Q.7 Mr. Purohit furnishes the following details relating to his holding in 8% Debentures (` 100 each) of P
Ltd., held as Current assets:
1.4.2024 Opening balance – Nominal value ` 1,20,000, Cost ` 1,18,000
1.7.2024 100 Debentures purchased ex-interest at ` 98
1.10.2024 Sold 200 Debentures ex-interest at ` 100
1.1.2025 Purchased 50 Debentures at ` 98 ex-interest
1.2.2025 Sold 200 Debentures ex-interest at ` 99
Due dates of interest are 30th September and 31st March.
Mr. Purohit closes his books on 31.3.2025. Brokerage at 1% is to be paid for each transaction (at ex-
interest price). Show Investment account as it would appear in his books. Assume FIFO method.
Market value of 8% Debentures of P Limited on 31.3.2025 is ` 99.
(Ans: Carrying Amount – ` 93,514, Interest Income credited to P&L A/c – ` 9,233)

Q.8 The following information is presented by Mr. Z (a stock broker), relating to his holding in 9% Central
Government Bonds.
Opening balance (nominal value) ` 1,20,000, Cost ` 1,18,000 (Nominal value of each unit is ` 100).
1.3.2024 Purchased 200 units, ex-interest at ` 98
1.7.2024 Sold 500 units, ex-interest out of original holding at ` 100
1.10.2024 Purchased 150 units at ` 98, cum interest.
1.11.2024 Sold 300 units, ex-interest at ` 99 out of original holdings

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 AS 13: Accounting for Investments

Interest dates are 30th September and 31st March. Mr. Z closes his books every 31st December. Show
the investment account as it would appear in his books. Mr. Z follows FIFO method.
Solution:
In the Books of Mr. Z
9% Central Government Bonds (Investment) Account
Nominal Nominal
Particulars Interest Principal Particulars Interest Principal
Value Value
2024 ` ` ` 2024 ` ` `
Jan.1 To Balance b/d Mar. 31 By Bank A/c
(W.N.1) 1,20,000 2,700 1,18,000 (W.N.3) - 6,300 -
Mar. 1 To Bank A/c July 1 By Bank A/c
(W.N.2) 20,000 750 19,600 (W.N.4) 50,000 1,125 50,000
July 1 To P&L A/c Sept. 30 By Bank A/c
(W.N.5) - - 833 (W.N.6) - 4,050 -
Oct. 1 To Bank A/c Nov. 1 By Bank A/c
(150 × 98) 15,000 - 14,700 (W.N.7) 30,000 225 29,700
Nov. 1 To P&L A/c Dec. 31 By Balance
(W.N.8) - - 200 c/d (W.N. 9
& 10) 75,000 1,688 73,633
Dec. 31 To P&L A/c
(b.f.) (Transfer) 9,938
1,55,000 13,388 1,53,333 1,55,000 13,388 1,53,333

Working Note:
1. Interest element in opening balance of bonds = ` 1,20,000 × 9% × 3/12
= ` 2,700
2. Purchase of bonds on 1.3.2024
Interest element in purchase of bonds = 200 × 100 × 9% × 5/12
= ` 750
Investment element in purchase of bonds = 200 × 98 = ` 19,600
3. Interest for half-year ended 31 March = 1,400 × 100 × 9% × 6/12
= ` 6,300
4. Sale of bonds on 1.7.2024
Interest element = 500 × 100 × 9% × 3/12
= ` 1,125
Investment element = 500 × 100 = ` 50,000
5. Profit on sale of bonds on 1.7.2024
Cost of bonds = (` 1,18,000/ ` 1,200) × 500
= ` 49,167
Sale proceeds = ` 50,000
Profit element = ` 833
6. Interest for half-year ended 30 September
= 900 × 100 × 9% × 6/12 = ` 4,050

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AS 13: Accounting for Investments

7. Sale of bonds on 1.11.2024

Interest element = 300 × 100 × 9% × 1/12 = ` 225
Investment element = 300 × 99 = ` 29,700
8. Profit on sale of bonds on 1.11.2024
Cost of bonds = (1,18,000/ 1,200) × 300 = ` 29,500
Sale proceeds = ` 29,700
Profit element = ` 200

9. Closing value of investment

Calculation of closing balance: Nominal value `
Bonds in hand remained in hand at 31st December 2024
From original holding (1,20,000 – 50,000 – 30,000) 40,000 (1,18,000/1,20,000)
x 40,000 = 39,333
Purchased on 1st March 20,000 19,600
Purchased on 1st October 15,000 14,700
75,000 73,633
10. Interest element in closing balance of bonds = 750 × 100 × 9% × 3/12 = ` 1,688

Q.9 M/s. Wye Ltd. issued 12% fully paid debentures of ` 100 each, interest being payable half yearly on
30th September and 31st March of every accounting year.
On 1st December, 2024, M/s. Bull & Bear purchased 10,000 of these debentures at ` 101 ex-interest
price, also paying brokerage @ 1% of ex-interest amount of the purchase. On 1st March, 2025 the
firm sold all these debentures at ` 103 ex-interest price, again paying brokerage @ 1% of ex-interest
amount. Prepare Investment Account in the books of M/s. Bull & Bear for the period 1st December,
2024 to 1st March, 2025.
Solution:
In the books of M/s Bull & Bear
Investment Account for the period from 1st December 2024 to 1st March, 2025
(Scrip: 12% Debentures of M/s. Wye Ltd.)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value (`) (`) Value (`) (`)
1.12.2024 To Bank 1.03.2025 By Bank A/c
A/c (W.N.1) 10,00,000 20,000 10,20,100 (W.N.2) 10,00,000 50,000 10,19,700
1.3.2025 To Profit 1.3.2025 Profit &
& Loss Loss A/c
A/c* (b.f.) - 30,000 (b.f.) 400
10,00,000 50,000 10,20,100 10,00,000 50,000 10,20,100
This represents income for M/s. Bull & Bear for the period 1st December, 2024 to 1st March, 2025, i.e.,
interest for three months- 1st December, 2024 to 28 February, 2025).

CA Intermediate (New Syllabus) 11.12

 AS 13: Accounting for Investments

Working Notes:
1. Cost of 12% debentures purchased on 1.12.2024 `
Cost Value (10,000 × ` 101) 10,10,000
Add: Brokerage (1% of ` 10,10,000) 10,100
Total 10,20,100
2. Sale proceeds of 12% debentures sold `
Sales Price (10,000 × ` 103) 10,30,000
Less: Brokerage (1% of ` 10,30,000) (10,300)
Total 10,19,700

Q.10 The following transactions of Nidhi took place during the year ended 31st March 2025:
1st April Purchased ` 12,00,000, 8% bonds of ` 100 each at ` 80.50 cum- interest.
Interest is payable on 1st November and 1st May.
12th April Purchased 1,00,000 equity shares of ` 10 each in X Ltd. for ` 40,00,000.
1st May Received half-year's interest on 8% bonds.
15th May X Ltd. made a bonus issue of three equity shares for every two held.
Nidhi sold 1,25,000 bonus shares for ` 20 each.
1st October Sold ` 3,00,000, 8% bonds at ` 81 ex-interest.
1st November Received half-year's bond interest.
1st December Received 18% interim dividend on equity shares (including bonus shares) in X Ltd.
Prepare the relevant investment account in the books of Nidhi for the year ended 31st March, 2025.
Solution:
In the books of Nidhi
8% Bonds Account [Interest Payable: 1st November & 1st May]
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value (`) (`) (`) Value (`) (`) (`)
1.4.2024 To Bank A/c 1.5.2024 By Bank A/c
(W.N.1) 12,00,000 40,000 9,26,000 (12,00,000 ×
8% × 6/12) - 48,000 -
1.10.2024 To Profit & Loss 1.10.2024 By Bank A/c
A/c (W.N 6) 11,500 (W.N 2) 3,00,000 10,000 2,43,000
1.11.2024 By Bank A/c
(W.N 3) - 36,000 -
31.3.2025 To Profit & Loss 31.3.2025 By Balancec/d
A/c 84,000 (W.N.4) 9,00,000 30,000 6,94,500
12,00,000 1,24,000 9,37,500 12,00,000 1,24,000 9,37,500

Investment in Equity Shares of X Ltd. Account

Date Particulars No. Dividend Cost Date Particulars No. Dividend Cost
(`) (`) (`) (`)
12.4.2024 To Bank A/c 1,00,000 40,00,000 15.5.2024 By Bank A/c 1,25,000 25,00,000
15.5.2024 To Bonus Issue 1,50,000 1.12.2024 By Bank A/c
15.5.2024 To Profit & LossA/c (W.N.7) 2,25,000
(W.N.5) 5,00,000
31.3.2025 To Profit & LossA/c 2,25,000 31.3.2025 By Balancec/d
(W.N.8) 1,25,000 20,00,000
2,50,000 2,25,000 45,00,000 2,50,000 2,25,000 45,00,000

CA Intermediate (New Syllabus) 11.13

AS 13: Accounting for Investments

Working Notes:
1. Cost of investment purchased on 1st April, 2024
12,000, 8% bonds were purchased @ ` 80.50 cum-interest. Total amount paid 12,000 bonds × ` 80.50 =
` 9,66,000 which includes accrued interest for 5 months, i.e. 1st November, 2023 to 31st March,
2024. Accrued interest will be ` 12,00,000 × 8/100 × 5/12 = ` 40,000. Therefore, cost of
investment purchased = ` 9,66,000 – 40,000 = ` 9,26,000.
2. Sale of bonds on 1st October, 2024
3,000 bonds were sold @ ` 81 ex-interest, i.e., Total amount received = 3,000 x 81 + accrued interest for 5
months = ` 2,43,000 + ` 10,000 (3,00,000 × 8/100 × 5/12).
3. Interest received on 1st November, 2024
Interest will be received for 9,000 bonds @ 8% for 6 months, i.e., ` 9,00,000 × 8/100 × 1/2 =
` 36,000.
4. Cost of bonds on 31.3.2024
Cost of bonds on 31.3.2024 will be ` 9,26,000/ 12,000 × 9,000 = ` 6,94,500. Interest accrued on
bonds on 31.3.2024 = 9,00,000 × 8% x 5/12 = ` 30,000
5. Profit on sale of bonus shares
Cost per share after bonus = ` 40,00,000/ 2,50,000 = ` 16 (average cost method being followed)
Profit per share sold (` 20 – ` 16) = ` 4.
Therefore, total profit on sale of 1,25,000 shares = ` 4 × 1,25,000 = ` 5,00,000.
6. Profit on sale of bonds
Sale value = 2,43,000
Cost of ` 3,00,000 8% bonds = 9,26,000/12,00,000 × 3,00,000 = 2,31,500
Profit = 11,500
7. Dividend on equity shares
1,25,000 × 10 × 18% = ` 2,25,000
8. Value of equity shares at end of year
Cost share after bonus = ` 16
Number of shares = 1,25,000
Value of equity shares at end of year = 1,25,000 × ` 16 = ` 20,00,000

Q.11 On 1st April, 2024 Mr. Shyam had an opening balance of 1000 equity shares of X Ltd. ` 1,20,000
(face value ` 100 each).
On 5.04.2024 he further purchased 200 cum-right shares for ` 135 each. On 8.04.2024 the director
of X Ltd announced right issue in the ratio of 1:6.
Mr. Shyam waived off 100% of his entitlement of right issue in the favour of Mr. Rahul at the rate of
` 20 each.
All the shares held by Shyam had been acquired on cum right basis and the total market price (ex-
right) of all these shares after the declaration of rights got reduced by ` 3,400.
On 10.10.2024 Shyam sold 350 shares for ` 140 each. On 31.03.2025, the market price of each share
is ` 125 each.
You are required to prepare the Investment account in the books of Mr. Shyam for the year ended
31.03.2025 assuming that the shares are being valued at average cost. [RTP May 2021]

CA Intermediate (New Syllabus) 11.14

 AS 13: Accounting for Investments

Solution:
In the books of Mr. Shyam
for the year ending on 31-3-2025 (Scrip: Equity Shares of X Limited)
Date Particulars Qty Amount Date Particulars Qty Amount
1.4.2024 To Balance b/d 1000 1,20,000 8.04.2024 By Bank A/c
(W.N.1) 3,400
5.04.2024 To Bank A/c 10.10.2024 By Bank A/c
(200 × ` 135) 200 27,000 (350 × ` 140) 350 49,000
10.10.2024 To Profit & Loss A/c 31.3.2025 By Balance c/d
(W.N.2) 7,117 (W.N.3) 850 1,01,717
1,200 1,54,117 1,200 1,54,117
Working Notes:
1. Sale of Rights ` 4,000
The market price of all shares of X Ltd. after shares becoming ex-rights has been reduced by
` 3,400.
In this case out of sale proceeds of ` 4,000; ` 3,400 may be applied to reduce the carrying amount to
the market value and ` 600 would be credited to the profit and loss account.

2. Profit on sale of 350 shares

Amount
Sale price of 350 shares (350 shares × 140 each) ` 49,000
Less: Cost of 350 shares [(1,20,000 + 27,000 – 3,400) × 350]/1200 ` 41,883
Profit ` 7,117
3. Valuation of 850 shares as on 31.03.2025
Particulars Amount
Cost price of 850 shares [(1,20,000 + 27,000 – 3,400) × 850 /1,200] ` 1,01,717
Fair Value as on 31.03.2024 [850 × ` 125 each] ` 1,06,250
Cost price or fair value whichever is less ` 1,01,717

Q.12 A Limited purchased 5,000 equity shares (nominal value ` 100 each) of Allianz Limited for ` 105
each on 1st April, 2024. The shares were quoted cum dividend. On 15th May, 2024, Allianz Limited
declared & paid dividend of 2% for year ended 31st March, 2024. On 30th June, 2024 Allianz
Limited issued bonus shares in ratio of 1:5. On 1st October, 2024 Allianz Limited issued rights share
in the ratio of 1:12 @ 45 per share. A Limited subscribed to half of the rights issue and the balance
was sold at ` 5 per right entitlement. The company declared interim dividend of 1% on 30 th
November, 2024. Right shares were not entitled to dividend. The company sold 3,000 shares on 31st
December, 2024 at ` 95 per share. The company A Ltd. incurred 2% as brokerage while buying and
selling shares. You are required to prepare Investment Account in books of A Ltd for the year ended
31st March, 2025.

CA Intermediate (New Syllabus) 11.15

AS 13: Accounting for Investments

Solution:
In the books of A Ltd.
Investment in equity shares of Allianz Ltd. for the year ended 31st March, 2025
Date Particulars No. Dividend Amount Date Particulars No. Dividend Amount
` ` ` `
2024 2024
April 1 To Bank A/c May 15 By Bank A/c
(W.N.1) 5,000 - 5,35,500 (dividend)
(W.N.6) - - 10,000
June 30 To Bonus Issue Nov. 30 By Bank A/c
(W.N 2) 1,000 - - (Interim
Oct. 1 To Bank A/c dividend)
(W.N. 3) (W.N.7) 6,000
250 - 11,250 -
Dec.31 To P & L A/c Dec. 31 By Bank A/c
(W.N. 5) - - 21,660 (W.N. 5) 3,000 - 2,79,300
2025 2025
March To P & L A/c March By Balance c/d
31 (b.f.) - 6,000 - 31 (W.N. 7) 3,250 - 2,79,110
6,250 6,000 5,68,410 6,250 6,000 5,68,410
Working Notes:
1. Calculation of cost of purchase on 1st April, 2024
` 105 × 5,000 shares = ` 5,25,000
Add: Brokerage (2%) = ` 10,500
` 5,35,500
2. Calculation of number of bonus shares issued
,
Bonus Shares = × 1 = 1,000

3. Calculation of right shares subscribed

,
Right Shares = = 500 shares
Shares subscribed = = 250 shares
Value of right shares subscribed = 250 shares @ ` 45 per share = ` 11,250
4. Calculation of sale of right entitlement
250 shares × ` 5 per share = ` 1,250
(Amount received from sale of rights will be credited to P&L A/c)

5. Calculation of profit on sale of shares

Total holding = 5,000 shares original
1,000 shares bonus
250 shares right shares
6,250 shares

3,000 shares were sold on 31.12.2024

Cost of total holdings of 6,250 shares (on average basis)
= ` 5,35,500 + ` 11,250 – ` 10,000 = ` 5,36,750

CA Intermediate (New Syllabus) 11.16

 AS 13: Accounting for Investments

, ,
Average cost of 3,000 shares would be × 3,000 = ` 2,57,640
,
`
Sale proceeds of 3,000 shares (3,000 × ` 95) 2,85,000
Less: 2% Brokerage (5,700)
2,79,300
Less: Cost of 3,000 shares (2,57,640)
Profit on sale 21,660

6. Dividend received on investment held as on 15th May, 2024

= ` 10,000 (5,000 × ` 100 × 2%) adjusted to Investment A/c
7. Dividend amounting ` 6,000 received on 30.11.2024 will be credited to P&L A/c
8. Calculation of closing value of shares (on average basis) as on 31st March, 2025
, ,
× 3,250 = ` 2,79,110
,

Q.13 During the year ended 31st March, 2025, Purple Ltd. entered into the following transactions:
1st April, 2024 Purchased ` 4,00,000, 10% Govt. loan (interest payable on 30th April and
31st October) at ` 70 cum interest.
1st April, 2024 Purchased 6,000 Equity shares of ` 5 each in XY Ltd. for ` 1,26,000.
1st October, 2024 Sold ` 80,000, 10% Govt. loan at ` 75 ex-interest.
15th January, XY Ltd. made a bonus issued of four equity shares for every three shares held.
2025 Purple Ltd. sold all of the bonus shares for ` 10 each.
1st March, 2025 Received dividend @ 22% on shares in XY Ltd. for the year ended 31st
December, 2024.
Prepare Investment accounts in the books of Purple Ltd. [Dec. 2021]
(Ans: 10% Govt. Loan – Carrying Amount - ` 2,10,666 and Interest credited
to P&L – ` 35,999 and Carrying Amount of Equity Shares – ` 52,350)

Q.14 Prerna Ltd. purchased on 1st April, 2024 8% convertible debenture in Anurag Ltd. of face value of
` 2,00,000 @ ` 108. On 1st July, 2024 Prerna Ltd. purchased another ` 1,00,000 debenture @ ` 112
cum interest.
On 1st October, 2024 ` 80,000 debenture was sold @ ` 108. On 1st December, 2024, Anurag Ltd.
gave option for conversion of 8% convertible debentures into equity share of ` 10 each. Prerna Ltd.
receives 5,000 equity shares in Anurag Ltd. in conversion of 25% debenture held on that date. The
market price of debenture and equity share in Anurag Ltd. at the end of year 2024 is `110 and ` 15
respectively.
Interest on debenture is payable each year on 31st March and 30th September.
The accounting year of Prerna Ltd. is calendar year.
Prepare investment account in the books of Prerna Ltd. on average cost basis. [May 2016]
(Ans: 8% Debentures – Carrying Amount - ` 1,79,300 and Interest credited
to P&L – ` 14,033 and Carrying Amount of Equity Shares – ` 59,767)

CA Intermediate (New Syllabus) 11.17

AS 13: Accounting for Investments

Q.15 M/s Innovative Garments Manufacturing Company Limited invested in the shares of another
company on 1st October, 2024 at a cost of ` 2,50,000. It also earlier purchased Gold of ` 4,00,000
and Silver of ` 2,00,000 on 1st March, 2021. Market value as on 31st March, 2025 of above
investments are as follows:
(`)
Shares 2,25,000
Gold 6,00,000
Silver 3,50,000
How above investments will be shown in the books of accounts of M/s Innovative Garments
Manufacturing Company Limited for the year ending 31st March, 2025 as per the provisions of
Accounting Standard 13 "Accounting for Investments"?
Solution:
As per AS 13 ‘Accounting for Investments’, for investment in shares if the investment is purchased with an
intention to hold for short-term period (less than one year), then it will be classified as current investment
and to be carried at lower of cost and fair value, i.e., in case of shares, at lower of cost (` 2,50,000) and
market value (` 2,25,000) as on 31st March 2025, i.e., ` 2,25,000.
If equity shares are acquired with an intention to hold for long term period (more than one year), then
should be considered as long-term investment to be shown at cost in the Balance Sheet of the company.
However, provision for diminution should be made to recognize a decline, if other than temporary, in the
value of the investments.
Gold and silver are generally purchased with an intention to hold it for long term period (more than one
year) until and unless given otherwise. Hence, the investment in Gold and Silver (purchased on 1st March,
2021) should continue to be shown at cost (since there is no ‘other than temporary’ diminution) as on 31st
March, 2025, i.e., ` 4,00,000 and ` 2,00,000 respectively, though their market values have been increased.

Q.16 A Limited invested in the shares of XYZ Ltd. on 1st December, 2024 at a cost of ` 50,000. Out of
these shares, ` 25,000 shares were purchased with an intention to hold for 6 months and ` 25,000
shares were purchased with an intention to hold as long-term Investment.
A Limited also earlier purchased Gold of ` 1,00,000 and Silver of ` 30,00,000 on 1st April, 2024.
Market value as on 31st March, 2025 of above investments are as follows:
Shares ` 47,500 (Decline in the value of shares is temporary)
Gold ` 1,80,000
Silver ` 30,55,000

How about investments will be shown in the books of accounts of M/s A Limited for the year ended
31st March, 2025 as per the provision of AS-13? [Nov. 2020]
Solution:
As per AS 13 ‘Accounting for Investments’, for investment in shares - if the investment is purchased with an
intention to hold for short-term period (less than one year), then it will be classified as current investment
and to be carried at lower of cost and fair value.
In the given case ` 25,000 shares held as current investment will be carried in the books at ` 23,750
(` 47,500/2).
If equity shares are acquired with an intention to hold for long term period (more than one year), then
should be considered as long-term investment to be shown at cost in the Balance Sheet of the company.

CA Intermediate (New Syllabus) 11.18

 AS 13: Accounting for Investments

However, provision for diminution should be made to recognize a decline, if other than temporary, in the
value of the investments. Hence, ` 25,000 shares held as long-term investment will be carried in the books
at ` 25,000.
Gold and silver are generally purchased with an intention to hold them for long term period (more than one
year) until and unless given otherwise.
Hence, the investment in Gold and Silver (purchased on 1st April, 2024) should continue to be shown at
cost (since there is no 'other than temporary' diminution) as on 31st March, 2025. Thus Gold at
` 1,00,000 and Silver at ` 30,00,000 respectively will shown in the books.
[
Q.17 A Company has invested a substantial amount in the shares of another company under the same
management. The market price of the shares of the aforesaid company is about half of that at which
these shares were acquired by the company. The management is not prepared to provide for the fall in
the value of shares on the ground that the loss is only notional till the time the shares are actually
sold?
Solution:
As per AS-13, for the purpose of determining carrying amount of shares the investment has to be classified
into long-term and current; in the instant case it appears that the investment is long-term; hence it should be
carried at cost, unless there is permanent diminution in value of investment. At the market price investment
is half of its cost. The reduction appears to be heavy and permanent; hence the provision for permanent
diminution (decrease) in value of Investment to be made. Contention of management is not as per AS-13.

Q.18 Blue-chip Equity Investments Ltd., wants to re-classify its investments in accordance with AS 13.
State the values, at which the investments have to be reclassified in the following cases:
(i) Long term investments in Company A, costing ` 8.5 lakh are to be reclassified as current. The
company had reduced the value of these investments to ` 6.5 lakh to recognise ‘other than
temporary’ decline in value. The fair value on date of transfer is ` 6.8 lakh.
(ii) Long term investments in Company B, costing ` 7 lakh are to be reclassified as current. The fair
value on date of transfer is ` 8 lakh and book value is ` 7 lakh.
(iii) Current investment in Company C, costing ` 10 lakh are to be reclassified as long term as the
company wants to retain them. The market value on date of transfer is ` 12 lakh.
Solution:
As per AS 13 ‘Accounting for Investments’, where long-term investments are reclassified as current
investments, transfers are made at the lower of cost and carrying amount at the date of transfer. And where
investments are reclassified from current to long term, transfers are made at lower of cost and fair value on
the date of transfer.
Accordingly, the re-classification will be done on the following basis:
(i) In this case, carrying amount of investment on the date of transfer is less than the cost; hence this re-
classified current investment should be carried at ` 6.5 lakh in the books.
(ii) The carrying / book value of the long term investment is same as cost i.e. ` 7 lakh. Hence this long
term investment will be reclassified as current investment at book value of ` 7 lakh only.
(iii) In this case, reclassification of current investment into long-term investments will be made at ` 10
lakh as cost is less than its market value of ` 12 lakh.

CA Intermediate (New Syllabus) 11.19

AS 13: Accounting for Investments

Q.19 On 15th June, 2025, Y Ltd. wants to re-classify its investments in accordance with AS-13. Decide and
state the amount of transfer, based on the following information:
1) A portion of long-term investments purchased on 1st March, 2024 are to be re-classified as current
investments. The original cost of these investments was ` 14 lakh but had been written down by
` 2 lakh (to recognise ‘other than temporary’ decline in value). The market value of these
investments on 15th June, 2025 was ` 11 lakh.
2) Another portion of long-term investments purchased on 15th January, 2024 are to be re-classified as
current investments. The original cost of these investments was ` 7 lakh but had been written down
to ` 5 lakh (to recognise ‘other than temporary ‘decline in value). The fair value of these
investments on 15th June, 2025 was ` 4.5 lakh.
3) Another portion of current investments purchased on 15th March, 2025 for ` 7 lakh are to be re-
classified as long-term investments, as the company has decided to retain them. The market value of
these investments on 31st March, 2025 was ` 6 lakh and fair value on 15th June 2025 was ` 8.5
lakh.
4) Another portion of current investments purchased on 7th December 2024 for ` 4 lakh are to be re-
classified as long-term investments. The market value of these investments on 31st March, 2025 was
for ` 3.5 lakh and on 15th June 2025 was for ` 3.8 lakh. [May 2019]
Solution:
As per AS-13 'Accounting for Investments', where long-term investments are reclassified as current
investments, transfers are made at the lower of cost and carrying amount at the date of transfer; and where
investments are reclassified from current to long term, transfers are made at lower of cost and fair value on
the date of transfer. Accordingly, the re-classification will be done on the following basis:
1) In this case, carrying amount of investment on the date of transfer is less than the cost; hence this re-
classified current investment should be carried at ` 12 lakh in the books.
2) In this case also, carrying amount of investment on the date of transfer is less than the cost; hence this
re-classified current investment should be carried at ` 5 lakh in the books.
3) In this case, re-classification of current investment into long-term investments will be made at ` 7 lakh as
cost is less than its fair value of ` 8.5 lakh on the date of transfer.
4) In this case, market value (considered as fair value) is ` 3.8 lakh on the date of transfer which is lower
than the cost of ` 4 lakh. The reclassification of current investment into long-term investments will be
made at ` 3.8 lakh.

Q.20 Kunal Securities Ltd. wants to reclassify its investments in accordance with AS-13. State the values, at
which the investments have to be reclassified in the following cases:
i. Long term investment in Company A, costing ` 10.5 lakh is to be reclassified as current
investment. The company had reduced the value of these investments to ` 9 lakh to recognize a
permanent decline in value. The fair value on the date of reclassification is ` 9.3 lakh.
ii. Long term investment In Company B, costing ` 14 lakh is to be reclassified as current investment.
The fair value on the date of reclassification is ` 16 lakh and book value is ` 14 lakh.
iii. Current investment in Company C, costing ` 12 lakh is to be reclassified as long term investment
as the company wants to retain them. The market value on the date of reclassification is ` 13.5
lakh.
iv. Current investment in Company D, costing ` 18 lakh is to be reclassified as long term investment.
The market value on the date of reclassification is ` 16.5 lakh. [Jan. 2021]

CA Intermediate (New Syllabus) 11.20

 AS 13: Accounting for Investments

Solution:
As per AS 13 'Accounting for Investments', where long-term investments are reclassified as current
investments, transfers are made at the lower of cost and carrying amount at the date of transfer. And where
investments are reclassified from current to long term, transfers are made at lower of cost and fair value on
the date of transfer.
Accordingly, the reclassification will be done on the following basis:
i. In this case, carrying amount of investment on the date of transfer is less than the cost; hence this
reclassified current investment should be carried at ` 9 lakh in the books.
ii. The carrying/book value of the long-term investment is same as cost i.e. ` 14 lakh. Hence this long-
term investment will be reclassified as current investment at book value of ` 14 lakh only.
iii. In this case, reclassification of current investment into long-term investments will be made at ` 12 lakh
as cost are less than its market value of ` 13.5 lakh.
iv. Market value of the investment is 16.5 lakh, which is lower than its cost i.e. ` 18 lakh. Therefore, the
transfer to long term investments should he done in the books at the market value i.e. ` 16.5 lakh.

Q.21 Mr. Mohan has invested some money in various Mutual funds. Following information in this regard
is given:
Mutual Date of Purchase cost Brokerage cost Stamp duty Market value
funds purchase (`) (`) (`) as on 31-03-2025 (`)
A 01.05.2021 50,000 200 20 48,225
B 05.08.2024 25,000 150 25 24,220
C 01.01.2025 75,000 300 75 78,190
D 07.05.2024 70,000 275 50 65,880
You are required to -
1. Classify his investment in accordance with AS-13.
2. Value of Investment in mutual fund as on 31-03-2025. [Dec. 2021]
Solution:
As per AS - 13, in case of long term investment, its carrying amount is its cost of investment. However, if
there is a permanent decline in its value, then such decline is recognised and the carrying amount shall be
reduced accordingly. Further, in case of current investment, its carrying amount is cost or fair value,
whichever is less.
[

Mutual Fund A
This investment shall be classified as long term investment as it has been held for more than 12 months. In
the given case, if we assume that the decline in the market value is a temporary decline, then its carrying
amount will be ` 50,220 (i.e. 50,000 + 200 + 20). However, if we assume that the decline is of permanent
nature then we shall record a loss of ` 1,995 (i.e. 50,220 - 48,225) and thus its carrying amount will be `
48,225.
Mutual Fund B
If the intention of Mr. Mohan is to hold it for more than 12 months, then it will be classified as long term
investment and in that case its carrying amount will be ` 25,175 (i.e. 25,000+150+25) assuming that the
decline in market value is not a permanent decline. But, if his intention is to sell the investment in a period
less than 12 months from the date of its acquisition, then it will be classified as a current investment and its
carrying amount will be ` 24,220, being lower of its cost ` 25,175 and market value of ` 24,220.

CA Intermediate (New Syllabus) 11.21

AS 13: Accounting for Investments

Mutual Fund C
If the intention of Mr. Mohan is to hold it for more than 12 months, then it will be classified as long term
investment and in that case its carrying amount will be its cost of ` 75,375 (i.e. 75,000 + 300 + 75). But, if
his intention is to sell the investment in a period less than 12 months from the date of its acquisition, then it
will be classified as a current investment and in that case also its carrying amount will be ` 75,375, being
lower of its cost ` 75,375 and market value of ` 78,190.
Mutual Fund D
If the intention of Mr. Mohan is to hold it for more than 12 months, then it will be classified as long term
investment and in that case its carrying amount will be ` 70,325 (i.e. 70,000 + 275 + 50) assuming that the
decline in market value is not a permanent decline. But, if his intention is to sell the investment in a period
less than 12 months from the date of its acquisition, then it will be classified as a current investment and its
carrying amount will be ` 65,880, being lower of its cost ` 70,325 and market value of ` 65,880.

Q.22
(i) An unquoted long term investment made in the shares of Rachel Limited is carried in the books of Ziva
Limited at a cost of ` 1,00,000. The audited financial statements of Rachel Limited received in May,
2025 showed that the company had been incurring cash losses with declining market share and the long
term investment may not fetch more than ` 55,000.
(ii) On 1st December, 2024 Ziva Limited had made an investment of ` 5,00,000 in 4000 Equity Shares of
Garry Limited at a price of ` 125 per share with an intention hold it for not more than six months. In
the first week of March, 2025, Garry Limited suffered heavy loss due to an earthquake; the loss was
not covered by an insurance policy. On 31st March, 2025, the shares of Garry Limited were trading at
a price of ` 80 per share on the Stock Exchange.
How would you deal with the above investments in the books of Ziva Limited for the year ended 31st
March, 2025 as per the provision of AS 13 'Accounting for Investments'? [Nov. 2022]
Solution:
(i) As per AS-13, investments classified as long term investments should be carried in the financial
statements at cost. However, provision for diminution should be made to recognise a decline, other
than temporary, in the value of the investments. AS-13 states that the indicators of the value of an
investment are obtained by reference to its market value, the investee's assets and results and the
expected cash flows from the investment.
In the given case, the cost of investment is ` 1,00,000. But the audited financial statement of Rachel
Limited showed that the company had been incurring cash losses and its market share also declined. As
a result, the investment may not fetch more than ` 55,000. Clearly, the decline in the value of
investment is other than temporary and hence the same shall be recognised. Thus, the long term
investment in the shares of Rachel Limited should be valued at ` 55,000 in the Balance Sheet for the
year ended 31-03-2025 and a loss of ` 45,000 towards reduction in the value of long term investment
should be debited to profit and loss account.
(ii) Investment in equity shares of Garry Limited is a current investment as it was made with an intention
to hold it for not more than six months. As per AS-13, a current investment should be carried at its
cost or realisable value, whichever is less. The cost of investment is ` 5,00,000. However, on 31-03-
2025, its market value is ` 3,20,000 (i.e. 4,000 × ` 80). Thus, the investment in Garry Limited shall be
carried over at ` 3,20,000 being lower of its cost and realisable value. And a loss of ` 1,80,000 should
be debited to profit and loss account on account of reduction in value of the said current investment.

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 AS 13: Accounting for Investments

PROBLEMS

Q.1 A Government company, on the directions of the Central Government, had made investment in the
share of certain other companies. During the year, some of these investments were sold at profit of
` 4 crores and the same was treated as revenue profit for the year. The value of remaining
investments on the balance sheet date had fallen by ` 3.60 crores for which no provision has been
made in the accounts.
(Ans: Provision should be made if there is permanent decline in value of investment)

Q.2 ABC Ltd. purchases 10,000 shares of XYZ Ltd. and issued its 5000 shares. Nominal value of shares
of both ABC Ltd. and XYZ Ltd. is ` 10. The fair value of shares of ABC Ltd. and XYZ Ltd. are `
11.50 and ` 12 respectively. Calculate the cost of acquisition of investment.
(Ans: ` 57,500)

Q.3 Tambros India Ltd. acquired 10,000 shares of ` 10 each of Almaz Impex Ltd. @ ` 12 per share in
2023. In 2025, Tambros acquired another 5000 shares of ` 10 each of Almaz Impex Ltd. @ ` 21 each
on right basis. Calculate the cost of acquisition of 15,000 shares. If the right shares were not
subscribed but were sold in the market at the rate of ` 15 each, then calculate the cost of acquisition
of shares and give the treatment of proceeds received against sale of right.
(Ans: ` 2,25,000; ` 1,20,000; Credit to P&L Account ` 75,000)

Q.4 AD Softex Ltd. acquired 10,000 shares of Insight India Ltd. at cum-right price of ` 100 per share.
Immediately thereafter Insight India Ltd. offered one right share for every 4 shares held @ ` 60 per
share. AD Softex Ltd. did not exercise the right but sold @ 20 per share. Market price (ex-right) for
share of Insight India Ltd. fell to ` 85. Calculate the value of investment.
(Ans: ` 9,50,000)

Q.5 Sportigo Ltd. acquired 10,000 shares of Zenith Ltd. @ ` 80 and paid brokerage @ 2% and stamp
duties of ` 5,000 on 20-1-2017. Sportigo Ltd. purchased another 15,000 shares of Zenith Ltd. @ `
86 and paid brokerage @ 2% and stamp duties of ` 12,200 on 25-2-2017. It sold 12,000 shares @ `
96 and brokerage @ 2% on 20-3-2025.
Calculate:
(a) The cost of acquisition.
(b) The cost of investment sold and profit/loss on sale of investment.
(c) Further, if Zenith Ltd. issued one bonus share for every two shares held on 5-3-2025 and
Sportigo Ltd. sold 12,000 shares @ 96% and brokerage @ 2% on 20-3-2025. Compute cost of
shares sold and carrying amount of investment.
(Ans: (a) ` 21,49,000 (b) ` 10,31,520 & ` 97,440 (c) ` 6,87,680 & ` 14,61,320)

Q.6 XYZ Ltd. purchased 2500 shares of 100 each of ACS (India) Ltd. on 20-4-2025 @ ` 120 per share.
XYZ Ltd. paid brokerage @ 2% and stamp duties of ` 8000. It acquired another 3000 shares of ACS
(India) Ltd. on 30-6-2025 @ ` 140 per share and paid for brokerage @ 2% and stamp duties of
` 10,000. ACS (India) Ltd. offered 1:1 right @ ` 80 per share on 30-9-2025. XYZ Ltd. acquired 3500

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AS 13: Accounting for Investments

shares exercising the right and sold the right for 2000 shares @ ` 30 per right. XYZ Ltd. received
dividend @ 40% on paid-up value of shares for 2024-2025. It sold 1500 shares @ ` 110 less
brokerage 2% on 28-11-2025.
Calculate:
(a) Cost of investment sold
(b) Carrying amount of unsold investment
(c) Profit on sale of investment
(Ans: (a) ` 1,35,400; (b) ` 6,77,000; (c) ` 26,300)

Q.8 Tyne Pvt. Ltd. has current investment. The following data of current investments are given below:
Cost Market value as Market value as on 31-3-2025
on 31-3-2024
Current Investment ` 1,50,000 ` 1,55,000 ` 90,000
Sold during 2023- Sold during 2024-
2024 2025
Number of shares 15,000 3,000 2000
Calculate:
1. Closing value of shares as on 31-3-2024
2. Closing value of shares as on 31-3-2025
(Ans: 1. ` 1,20,000; 2. ` 90,000)

Q.9 A company has subscribed to the shares of Associate company amounting to ` 5 crores. The
Associate company has incurred substantial losses and has been referred to BIFR for being declared
as sick company. The company does not want to make any provision for the fall in the value of the
investment. Comment.
(Ans: Stand of the Company is not in accordance with AS-13)

Q.10 Fincorp Ltd. has marketable equity securities as short term investment. The cost and market value
at 31-3-2025 were as follows:
Securities Cost (`) Market Value (`)
A - 100 shares 2,800 3,400
B - 1000 shares 17,000 15,300
C - 2000 shares 31,500 29,500
51,300 48,200
Calculate the carrying amount of investment as on 31-3-2025. (Ans: ` 47,600)

Q.11 Sun Corp. Ltd. investment in marketable debt securities cost ` 6,50,000 which were classified as
available for sale on 31-3-2024. On 30-9-2024, Sun Corp. Ltd. decided to hold the investment to
maturity and accordingly reclassified them from held to maturity category on that date.
Date Market value of investment
31-3-2024 5,75,000
30-9-2024 5,30,000
31-3-2025 4,90,000

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 AS 13: Accounting for Investments

a) Calculate the amount of loss/profit from investment on reclassification.

b) Calculate the carrying amount of investment on 31-3-2025.
(Ans: (a) ` 45,000 (Loss), (b) ` 5,30,000)

Q.12 Grand Softex Ltd. acquired 30% of East Softex's equity shares for ` 2,00,000 on 1-6-2024.
Grand's 30% interest in East gave the Grand the ability to exercise significant influence over East in
operating and financial policies. During the financial year 2022-23, East earned ` 80,000 and
declared dividend of ` 50,000 on 12-8-2024. East reported earnings of ` 3,00,000 for the financial
year 2024-2025 and declared dividend of ` 60,000 on 12-6-2025.
Calculate the carrying amount of investment in separate financial statement of Grand Softex Ltd.
on 31-3-2025. (Ans: ` 1,85,000)

Q.13 X Ltd. purchased a flat in a group housing co-operative society on 30-4-2024 for ` 15,00,000. It
also purchased a membership share for ` 25,000 to acquire the flat so purchased. Calculate the
value of investment property. (Ans: ` 15,25,000)

CA Intermediate (New Syllabus) 11.25